What are the tax implications of withdrawing money early from a retirement account to pay bills or debt?
Withdrawing money early from a retirement account comes with a 10% tax penalty if you withdraw your money before age 59-1/2 in addition to the regular income tax on the amount withdrawn. There can be other consequences, too. The retirement money may also bump you into a higher tax bracket, which can result in the taxation of other income, such as social security, that you may have not been taxed on otherwise.
In addition, there are tax breaks for victims of natural disasters who have withdrawn from retirement accounts.
For more information, visit: https://www.irs.gov/taxtopics/tc558
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